2/04/2008 @ 3:45PM

Winter Windfall For Vestas Wind Systems

The price squeeze on energy supplies is helping wind energy firms like Denmark’s Vestas Wind Systems. The world’s largest manufacturer of wind turbines had such a good Christmas it’s now upgrading its full-year forecasts.

The company said Monday that a strong fourth quarter will help its 2007 sales rise 25.8% year-on-year, to 4.9 billion euros ($7.3 billion), rather than last November’s prediction of 16.8%. Profit margins before interest and tax should also gain 3.8 points, to 9.0%, rather than the previous forecast of 8.0%.

This is not the first time Vestas has announced impressive results: last August, the company saw quarterly profits increase fivefold to 51 million euros ($75.6 million). But it was a pleasant surprise to exceed expectations in a matter of months. (See “Vestas Wind Systems Blows Strong”)

“The magnitude of the profit upgrade, that was a surprise to me,” said Peter Rothausen, a Copenhagen-based analyst with Kaupthing Bank. He said that the quarter’s strong performance had been mostly due to fresh orders and pre-payments, which boosted Vestas Wind Systems’ cash flow forecast by 16.7% year-on-year to 700 million euros ($1.0 billion) for 2007.

According to Vestas Wind Systems spokesman Peter Wenzel Kruse, the result was a vindication of the company’s pricing overhaul in 2005. He said that customers now had to pay a slice of the fee up-front when buying a wind turbine, which could be anywhere from 5% to 20% of the total cost. Milestone payments would be added along the way.

The fact that Vestas was able to re-negotiate its pricing plan, and that it has shown a clear ability to boost profit margins year-on-year, points to the competitive edge of alternative energies like wind. The cost of raw materials may be going up, just as in the oil industry, but wind energy is still cost-effective enough to pass on the costs. (See “Shell Counts The Cost Of Oil”)

And strong demand for alternative energy will see the global wind energy market continue to grow in 2008. According to the World Resources Institute, China and the United States will record some of the fastest growth in installed wind energy capacity, as they try to curb their carbon dioxide emissions and their dependence on fossil fuels.